In 2005 the federal government spent approximately

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Unformatted text preview: Key Terms
national debt
budget deficit
budget surplus How Does the Federal
Government Spend Money?
In 2005, the federal government spent
approximately $2,451 billion. How was this
money spent? The federal government breaks
down its spending according to categories, a
few of which are briefly discussed here. National Defense
In 2005, the federal government spent
$497 billion on national defense (and
about $31 billion on homeland security). If
we sum national defense and homeland
security, this total amount
was about 21.5 percent of
“It’s a billion here and a
total federal government
billion there; the first
thing you know it adds up spending in that year. In
other words, out of every
to real money.”
dollar the federal govern—Senator Everett Dirksen
ment spent in 2005, 21.5
cents went to national defense and homeland security. This money largely goes to
pay the men and women in the armed
services and to buy and maintain military
weapons. 376 Chapter 14 Taxing and Spending Income Security, Retirement, and
Disability
Income security refers to government
programs such as housing assistance, food
and nutrition assistance for the poor, unemployment compensation (for those persons
who have lost their jobs), food stamps, child
nutrition programs, federal employee disability payments, and so on. The federal government spent $197 billion on income
security in 2005. On other retirement and
disability programs it spent $147 billion.
The sum total here is $344 billion or 14 percent of total federal government spending. Social Security
The federal government in 2005 spent
$516 billion on Social Security payments,
which largely go to retired persons. These
payments were a little more than 21 percent
of total federal government spending. Medicare
In 2005, the federal government spent
$297 billion on Medicare, which is hospital 14 (364-389) EMC Chap 14 11/18/05 10:58 AM Page 377 It is likely that
many of these senior
citizens participate in
the federal government’s Medicare
program. In 2005
the federal government spent $297
billion on Medicare. and medical insurance for Social Security
beneficiaries. This amount was 12.1 percent
of total federal government spending. Net Interest on the National Debt
When the government spends more
money than it receives in tax revenues, it is
said to run a budget deficit. For example, if
the government spends $2,000 billion and
its tax revenue is $1,800 billion, the budget
deficit is $200 billion. The government has
to borrow the $200 billion, in much the
same way that people have to borrow
money if their expenditures are greater
than their income. The federal government borrowed much money over the
years; on October 24, 2005, its total debt—
referred to as the n ational debt —was
$8,009 billion or $8.009 trillion. If you
want to know what the national debt is
today, go to www.emcp.net/nationaldebt.
This Web site will show you the national
debt to the penny.
The federal government has to pay interest
on this debt, in much the s...
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